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Ann wants to buy an office building which costs $1,000,000. She obtains a 30 year fully amortizing fixed rate mortgage with 80% LTV, an annual
Ann wants to buy an office building which costs $1,000,000. She obtains a 30 year fully amortizing fixed rate mortgage with 80% LTV, an annual interest rate of 4%, with monthly compounding and monthly payments.
The mortgage has a 2% prepayment penalty if the borrower prepays in the first 5 years. Suppose Ann makes the required monthly payment for 3 years and prepays after her final monthly payment at the end of 3 years. What is the annualized IRR on Anns mortgage?
| A. | 0.38% | |
| B. | 4.60% | |
| C. | 4.00% | |
| D. | 5.73% |
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